Sunday, October 08, 2006

How Valuable Are Indian and Chinese Banks

Many are talking about Indian banks are superior to Chinese ones. But the facts are so different with many assume. For more details, please go to Rediff.com, an Indian web portal.

ICBC (The Industrial and Commercial Bank of China) is planning to float 24 per cent of its enlarged share capital and could even sell more shares by exercising the greenshoe option. After the IPO, its valuation will roughly be about $87 billion. This is almost one and half times of the collective market capitalisation of all listed Indian banks - for the 37 listed Indian banks, this is about $ 62.76 billion (Rs 2,86,859 crore).

China's second-biggest lender, Bank of China, raised $13.2 billion in June by offering 10.5 per cent of its capital to the public and the country's third largest bank, China Construction Bank, raised $9.2 billion last October. Bank of China's market capitalisation is now around $105 billion and that of China Construction Bank $ 99 billion.

In terms of market capitalisation, ICBC will still be far behind Citigroup ($140 billion), but it is a giant vis-�-vis Indian banks. ICICI Bank tops the market capitalisation chart with $ 13.59 billion (Rs 62,177 crore), followed by the State Bank of India with $11.89 billion (Rs 54,380 crore) and HDFC Bank with $6.29 billion (Rs 28,774 crore). None of the other listed Indian banks has over $5 billion worth of market capitalisation. Punjab National Bank, the fourth bank when it comes to market capitalisation, is worth just $3.62 billion.Canara Bank is worth just $2.52 billion.

Indian banks do not have the scale. ICBC has total assets of over $ 812 billion, close to the size of India's GDP! Despite such large assets, the large Chinese banks have recorded annual growth rates of over 10 per cent in total assets over the past three to four years.

State Bank of India, which accounts for almost one-fifth of total banking assets in India, however, has an asset base of only $84 billion.

International investors believe the potential is huge and things can only get better in China. In the case of India, it is a story of missed opportunities, an interfering government-owner and a micro-managing banking regulator.